Proposed purchase of Magic Life hotels – a related

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you should seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act 2000. If you have sold or otherwise transferred all your TUI Travel PLC shares, please send this document, together with any accompanying documents (but not the personalised Form of Proxy), as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. (incorporated and registered in England and Wales under number 6072876) Proposed purchase of Magic Life hotels – a related party transaction with TUI AG Notice of General Meeting This document should be read as a whole. Your attention is drawn to the letter from your Deputy Chairman which is set out on pages 2 to 6 of this document and which recommends you vote in favour of the resolution to be proposed at the General Meeting referred to below. Notice of a General Meeting of TUI Travel PLC to be held on 22 June 2011 at 10.30am at the offices of Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS is set out at the end of this document. A Form of Proxy for use at this General Meeting is enclosed. To be valid, the Form of Proxy should be completed, signed and returned in accordance with the instructions printed on it to Equiniti Limited at Aspect House, Spencer Road, Lancing, West Sussex BN99 6LA as soon as possible but in any event so as to arrive not later than 10.30am on 20 June 2011 (48 hours before the time fixed for the start of the General Meeting). Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin ‐ Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the Financial Services Authority. Details about the extent of Deutsche Bank AG's authorisation and regulation by the Financial Services Authority are available on request. Deutsche Bank AG, London Branch is acting as financial adviser to TUI Travel PLC and no one else in connection with the Proposed Transaction and will not be responsible to anyone other than TUI Travel PLC for providing the protections afforded to clients of Deutsche Bank AG, London Branch, nor for providing advice in relation to the Proposed Transaction or any matters referred to herein. CONTENTS Page PART I – LETTER FROM THE DEPUTY CHAIRMAN...................................................................................................2 PART II – SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSED TRANSACTION ...............7 PART III – ADDITIONAL INFORMATION ................................................................................................................12 DEFINITIONS.........................................................................................................................................................14 NOTICE OF GENERAL MEETING ............................................................................................................................17 TIMETABLE OF EVENTS Final date for receipt by Registrars of Forms of Proxy 20 June 2011 at 10.30am Time and date of General Meeting 22 June 2011 at 10.30am Notes: (1) References to times in this document are to London time unless otherwise stated.
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PART I LETTER FROM THE DEPUTY CHAIRMAN TUI TRAVEL PLC (incorporated and registered in England and Wales under number 6072876) Registered Office: TUI Travel House Crawley Business Quarter Fleming Way Crawley West Sussex RH10 9QL 6 June 2011 To the holders of TUI Travel PLC shares and, for information only, the participants in the Company’s Employee Share Schemes Dear Shareholder PROPOSED RELATED PARTY TRANSACTION BETWEEN (1) MAGIC LIFE GMBH & CO KG, (2) TUI AG, (3) TUI TRAVEL OVERSEAS HOLDINGS LIMITED AND (4) TUI TRAVEL PLC Introduction On 26 May 2011, your Board announced that Magic Life, TUI AG, TUI Travel Overseas and the Company had conditionally agreed that, pursuant to the Proposed Transaction Documents, TUI Travel Overseas and certain other wholly‐owned subsidiaries of the Company will acquire the ML Companies from Magic Life and the Minority Shareholders. The acquisition will comprise (i) the entire issued share capital of each of ML Spain, ML Tunisia I, ML Tunisia II and ML Turkey, (ii) the parts in ML Egypt corresponding to a 100% participation in ML Egypt and (iii) the units in ML Greece corresponding to a 100% participation in ML Greece. Magic Life currently leases and manages 13 holiday clubs through the ML Companies, located in Turkey (6), Tunisia (3), Egypt (2), Greece (1) and Spain (1). TUI Travel Group will also acquire certain "Magic Life" trademarks as part of the Proposed Transaction. I am writing to give you further details of the Proposed Transaction, including the background to and reasons for it, to explain why your Board considers it to be in the best interests of the Company and to convene a shareholder meeting to seek your consent to the Proposed Transaction. The Proposed Transaction is classified under the Listing Rules as a "related party transaction" as TUI AG is classified as a "related party" as a substantial shareholder of the Company and Magic Life is classified as a "related party" as an associate of TUI AG since it is TUI AG's subsidiary undertaking. Consequently, the Proposed Transaction is conditional upon and must be approved by the Company's shareholders other than TUI AG and its affiliates before it is completed. Your approval will be sought at a General Meeting to be held on 22 June 2011. The notice convening the General Meeting is set out at the end of this document. If you would like to vote on the Resolution but cannot come to the General Meeting, you can appoint a proxy to exercise all or any of your rights to attend, vote and speak at the General Meeting by using one of the methods set out in the notes to the notice of the General Meeting. 2
Background to and reasons for the Proposed Transaction Magic Life was founded in the early 1990s to provide an all‐inclusive holiday product to the Austrian market. Magic Life is currently owned by TUI AG. Magic Life's business is well regarded as an important mid‐range all‐
inclusive product, primarily for the German and Austrian source markets, and is an important part of the differentiated product offerings of our tour operators in these markets. It has 13 high quality holiday clubs in excellent locations in Turkey (6), Tunisia (3), Egypt (2), Greece (1) and Spain (1). The business has recently generated an operating loss before taxation of €22.6 million (according to the ML Companies' latest statutory accounts for the year ended 30 September 2010) and has previously been highlighted by TUI AG as a non‐core asset which may be subject to disposal. This reported loss, when adjusted for certain costs that will not form part of the Proposed Transaction (following the restructuring of Magic Life detailed below), is reduced to €10.3 million1. We intend to acquire the operating companies which lease and manage the Magic Life holiday clubs (the ML Companies) for a de minimis consideration of €6, which reflects the current losses generated by the business. The operating companies are being acquired on the basis of balance sheets prepared in accordance with IFRS as at 31 October 2010, which showed gross assets of €46.4 million and net assets of €6.6 million2 including contingent debt of up to €10.5 million. Prior to the proposed acquisition of the ML Companies by TUI Travel Group, TUI AG will complete the restructuring of Magic Life such that Magic Life's Vienna head office costs, Magic Life's Istanbul office costs and the costs of its Sirene City property and its Nile cruise ship, the MS Regent, will not form part of the Proposed Transaction. This restructuring will reduce significantly the ongoing costs in the businesses that TUI Travel Group will acquire. TUI Travel Group will have no liability for closure of these offices/business and all employee termination costs will be with TUI AG and Magic Life. The functions being carried out by these offices will not need to be replicated by TUI Travel Group once it has acquired the ML Companies. The Proposed Transaction is consistent with TUI Travel Group's strategy of securing exclusive access for TUI Travel Group to an attractive, differentiated high‐quality club product in good locations. In addition, it will enable TUI Travel Group to (i) expand the product concept into new source markets and destinations, (ii) protect and grow TUI Travel Group tour operator margins on sales of this product and (iii) improve the financial performance of the ML Companies through cost savings, improved occupancy, yield management and future expansion. Differentiated products typically enjoy higher margins as a result of an earlier booking profile, higher customer satisfaction, more repeat bookings and an increased share of customers' total holiday spend due to the all‐ inclusive nature of the product. Increasing our mix of differentiated product is a key strategic imperative across all our source markets. Currently, our differentiated product mix is c.38% and we are targeting a mix of 65% in the next 3‐5 years. The acquisition of the ML Companies will also enable us to grow the business by expanding the concept beyond its traditional source markets of Austria and Germany as well as expanding into new destinations. As part of an integrated tour operator with other club concepts it will also enable us to maximize the potential of each property by tailoring it to the needs of specific source market customers. For example, TUI Travel intends to operate two of the Turkish clubs as a Holiday Village (the family concept from the UK source market) and a Blue Village (the family club concept from the Nordic source markets) rather than under the Magic Life brand. We believe that this will increase the yield and occupancy ratios of the clubs and maximise end‐to‐end profitability. The ML Companies' product is an important source of profits for TUI Travel Group tour operators. The margins earned on this product are at the upper end of the range of margins achieved from other product sales in the same territories. By acquiring the ML Companies we protect an important source of profits for our tour operators. Your Board believes that the above opportunities, along with other planned operational improvements, will enable the ML Companies to achieve at least a break‐even result in 2012 and growth thereafter. We expect the transaction to have a positive impact on underlying operating profit in the second half of 2011. 1
By adjusting the loss before taxation of €22.6 million for Magic Life's Vienna head office costs of €10.4 million and losses of €1.9 million for assets that are not being acquired as part of the Proposed Transaction
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Gross assets of €46.4 million less: (i) current liabilities of €34.4 million and (ii) provisions of €5.4 million
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Under the Listing Rules, any director of the Company who is, or an associate of whom is, the related party, or who is a director of the related party should not have taken part in the Board's consideration of the Proposed Transaction. Since Dr Michael Frenzel, Mr Horst Baier and Mr Peter Long are directors of TUI AG as well as of the Company, none of them have taken part in the Board's consideration of the Proposed Transaction. Principal terms and conditions of the Proposed Transaction The key terms and conditions of the Proposed Transaction are as follows:  Pursuant to the SPA, TUI Travel Overseas and certain other Subsidiaries of the Company will acquire a 100% interest in each of the ML Companies for a total consideration of €6 (€1 per company) with the assumption of contingent debt of up to €10.5 million (technically up to the sum of 7,058,088 Tunisian Dinars and 13,786,039 Turkish Lira) owed to TUI AG. The contingent debt is assumed by way of loans from TUI AG (the Excess VAT Loan Agreements) and is repayable only from proceeds of certain doubtful VAT reclaims believed potentially to be recoverable on the full balance sheets of each of the ML Companies prepared in accordance with IFRS as of 31 October 2010.  TUI AG will give certain customary warranties and indemnities and its liability under the SPA is capped at €4.5 million in respect of its general warranties and indemnities and at €20 million in respect of its tax warranties and indemnity.  In addition, pursuant to the Supplemental Agreement, TUI AG will pay compensation to TUI Travel Overseas on the following contingent events: o TUI AG will compensate TUI Travel Overseas for any Excess Winter Losses, which amount shall be adjusted in the event that there were any Egyptian and Tunisian Winter Disruption Losses to an amount equal to 100% of the Excess Winter Losses (excluding the amount of any Egyptian and Tunisian Winter Disruption Losses) plus an amount equal to the lesser of (i) 50% of any Egyptian and Tunisian Winter Disruption Losses and (ii) the Excess Winter Losses; o TUI AG will compensate TUI Travel Overseas for 50% of any Egyptian and Tunisian Summer Disruption Losses; and o TUI AG will compensate TUI Travel Overseas for certain structural Capex improvements required in the ML Companies' properties which are not met by the hotel owners – compensation will be calculated on a €1 for €1 basis up to €5.5 million, then on a €0.5 for every €1 basis, in excess of €5.5 million, up to a maximum of €11.7 million.  Pursuant to the Umbrella Agreement, the parties undertake to use their respective commercially reasonable endeavours to procure the implementation of the Proposed Transaction and TUI AG and Magic Life hold harmless and indemnify the Company and its relevant Subsidiaries against a number of transactional risks, including as a result of the operation of Austrian law.  Pursuant to the Trademark Assignment Agreement, certain "Magic Life" trademarks owned by Magic Life, and the rights and obligations under certain co‐existence agreements, prior rights agreements and licence agreements with respect to these trademarks, are to be transferred to TUI Austria for a total consideration of €1.  Pursuant to the Credit Facility Agreement, the underlying debt and seasonal financing requirement of the ML Companies are to be funded by the provision of a €50 million financing facility by TUI AG, to fund the Winter low season, the terms of which are: o Rate – EURIBOR plus 275 basis points o Term – Advances may only be drawn until 30 June 2011 and must have been reduced to no more than €30 million by 1 September 2011 and no more than €10 million by 1 May 2012. Repayment in full is due by 31 August 2012 or potentially earlier in the event that an offer is made for the Company's entire issued share capital Subject to your consent to the Proposed Transaction and to the satisfaction of all conditions to the Proposed Transaction, the Proposed Transaction is expected to complete towards the end of June 2011. A more detailed 4
summary of the principal terms and conditions of the SPA, the Supplemental Agreement, the Umbrella Agreement, the Trademark Assignment Agreement and the Loan Agreements is set out in Part II of this document. General Meeting The Proposed Transaction is a related party transaction and must therefore by approved by the Company's shareholders at a General Meeting. Set out at the end of this document is a notice convening the General Meeting to be held on 22 June 2011 at 10.30am at the offices of Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS. At the General Meeting an ordinary resolution to approve the entry into the Proposed Transaction Documents will be proposed. Under the Listing Rules, because each of TUI AG and Magic Life is classified as a "related party", the Company must ensure that neither of them votes on the Resolution and the Company must take all reasonable steps to ensure that TUI AG and Magic Life's respective associates do not vote on the Resolution. As at 3 June 2011 (being the latest practicable date prior to the date of this letter), so far as the Company is aware, TUI AG, directly or indirectly, holds voting rights of 55.47% of the existing issued share capital of the Company (which does not include any Treasury Shares as the Company does not currently hold any of its shares in treasury). As at 3 June 2011, so far as the Company is aware, Magic Life does not, directly or indirectly, hold any voting rights of the Company and Magic Life is only classified as a "related party" by virtue of being an associate of TUI AG as TUI AG's subsidiary undertaking. TUI AG and Magic Life will in any event not vote in relation to the Resolution and TUI AG and Magic Life have undertaken to take all reasonable steps to ensure that their respective associates will also abstain from voting in relation to the Resolution. Dr Michael Frenzel, Mr Horst Baier and Mr Peter Long will also not vote in relation to the Resolution at the General Meeting, although they are not technically prohibited from doing so, as they are directors of TUI AG as well as directors of the Company. Action to be taken Enclosed is a form of proxy for use by the ordinary shareholders of the Company at the General Meeting. Whether you intend to be present at the General Meeting or not, you are asked to complete and return the form of proxy, in accordance with the instructions printed thereon, as soon as possible and, in any event, so that it is received not later than 10.30am on 20 June 2011. Completion and return of a form of proxy will not preclude you from attending the General Meeting and voting in person should you so wish. An appointment of a proxy may also be returned by completing it online, please refer to the notes on pages 18 to 20 inclusive. For CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service, please refer to the notes on pages 18 to 20 inclusive. Further information Your attention is drawn to the additional information set out in Parts II and III of this document relating to the Company and the Proposed Transaction. You are advised to read the whole document and not merely rely on the key or summarised information in this letter. Recommendation Your Board, which has been so advised by Deutsche Bank, considers that the Proposed Transaction is fair and reasonable as far as the Company's Shareholders as a whole are concerned. In giving its advice, Deutsche Bank has taken into account the Board’s commercial assessment of the Proposed Transaction. Since Dr Michael Frenzel, Mr Horst Baier and Mr Peter Long are directors of TUI AG as well as of the Company, none of them took part in the Board's consideration of the matter nor was the commercial assessment of any of them taken into account by Deutsche Bank. Your Board considers that the Proposed Transaction is in the best interests of the Company's shareholders as a whole. Again, none of Dr Michael Frenzel, Mr Horst Baier and Mr Peter Long took part in the Board's consideration of the matter. Accordingly, your Board unanimously (apart from Dr Michael Frenzel, Mr Horst Baier and Mr Peter Long) recommends that you vote in favour of the Resolution to be proposed at the General Meeting, as each Director (apart from Dr Michael Frenzel, Mr Horst Baier and Mr Peter Long) intends to do in respect of his own beneficial 5
holdings which amount in aggregate to 1,499,094 shares, representing approximately 0.134% of the existing issued share capital of the Company (which does not include any Treasury Shares as the Company does not currently hold any of its shares in treasury) as at 3 June 2011, being the last practicable day prior to the date of this letter. As at 3 June 2011, being the last practicable day prior to the date of this letter, Mr Peter Long, directly or indirectly, holds voting rights of 0.282% of the existing issued share capital of the Company and Dr Michael Frenzel and Mr Horst Baier do not have any interest in the Company's shares. Yours sincerely Sir Michael Hodgkinson Deputy Chairman
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PART II SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSED TRANSACTION SPA The principal terms of the SPA are as follows: Sale and purchase of the ML Companies: Subject to the fulfillment or waiver of the Conditions Precedent (as defined in the SPA), Magic Life shall sell, transfer and assign at Closing (meaning broadly 8.30am on the 5th business day after the last of the Conditions Precedent has been fulfilled or waived or such other time or date as may be mutually agreed by the parties to the SPA) and TUI Travel Overseas shall purchase and agrees to accept at Closing the transfer and assignment of all shares, parts and units in the ML Companies not held by the Minority Shareholders. In addition, Magic Life shall procure the sale, transfer and assignment at Closing of all shares, parts and units in the ML Companies held by the Minority Shareholders (meaning parts corresponding to no more than a 1% participation in ML Egypt, units corresponding to a 0.1% participation in ML Greece, shares corresponding to a 0.004% participation in ML Tunisia I, shares corresponding to a 0.3% participation in ML Tunisia II and shares corresponding to a 0.032% participation in ML Turkey) to certain of the Company's Subsidiaries other than TUI Travel Overseas and TUI Travel Overseas shall procure the acceptance of the sale, transfer and assignment of such shares, parts and units at Closing by such Subsidiaries. Title to all of the shares, parts and units will not technically transfer on Closing as a number of post‐Closing steps need to be taken by the parties to the SPA to perfect the agreed transfer. Purchase price: The purchase price, payable on Closing, shall be €6. Representations and warranties of Magic Life: Magic Life gives certain customary representations, warranties and guarantees about, amongst other things, (i) itself, (ii) the ML Companies and the ML Companies' assets, liabilities, tax affairs, contractual arrangements and employment matters, (iii) the execution, delivery and performance of the SPA, (iv) its financial statements and the ML Companies' monthly management accounts. Tax indemnity of Magic Life: Magic Life gives TUI Travel Overseas a customary tax indemnity and shall hold TUI Travel Overseas and the ML Companies harmless against certain taxes imposed on the ML Companies. Limitation of liability by amount: TUI Travel Overseas is only entitled to indemnification for a breach of the Seller's representations, warranties and guarantees if the amount of one or more claims alone or in aggregate exceed(s) €450,000. The aggregate liability of Magic Life in respect of its representations, warranties and guarantees other than a specific one in respect of taxes shall not exceed €4.5 million. The aggregate liability of Magic Life in respect of the specific representation, warranty and guarantee in respect of taxes and under or in connection with the tax indemnity shall not exceed €20 million. Limitation of liability by time: Claims for breach of the Seller's representations, warranties and guarantees must be brought within 30 months from Closing save for those falling under the headings "Organisation", "Power and Authority", "Shares and Share Capital" and "No Participations", which must be brought within 5 years from Closing, and the specific one in respect of taxes, which must be brought within 3 months after all taxes have been finally charged and assessed for periods until Closing or within 3 months after the legally binding completion of the relevant tax audit if a tax audit is conducted for the period up to Closing. Claims under or in connection with the Tax indemnity are limited by time on the same basis as claims for breach of the Seller's specific representation, warranty and guarantee in respect of taxes. Claims based on fraudulent misrepresentations, deceit or force are subject only to statutory limitation periods. Special indemnity: Magic Life and TUI AG jointly and severally indemnify and hold harmless TUI Travel Overseas against certain existing third party proceedings without limiting their liability by amount or by time. Interim period: During the period from 31 October 2010 to Closing, the Seller covenants to act and to procure that the ML Companies and certain other third parties act in certain customary ways. These obligations include an obligation to procure the implementation of a restructuring steps plan agreed by the parties to the SPA. Conditions precedent: TUI Travel Overseas' obligations under the SPA are conditional upon satisfaction of a number of conditions precedent including, without limitation, implementation in full by Magic Life at Magic Life's cost and expense the restructuring steps plan agreed by the parties to the SPA, certain other actions being 7
taken in respect of certain of the ML Companies and all necessary regulatory approvals having been obtained. Magic Life and TUI AG agree joint and severally to indemnify and hold TUI Travel Overseas or, at TUI Travel Overseas' sole discretion, the respective ML Company harmless from and against any costs and expenses incurred by any ML Company as a result of the implementation of the restructuring steps plan. Post Closing obligations: Magic Life has a number of obligations that it shall use its best endeavours to complete as soon as possible after Closing that are required to perfect the Proposed Transaction. In addition, subject to receipt by TUI Travel Group of the amounts drawn down by TUI Travel Overseas under the Credit Facility Agreement, TUI Travel Overseas and the Company shall procure prompt repayment of certain agreed Company Liabilities (as defined in the SPA) by or on behalf of the ML Companies. Agreement and guarantee transfer plan and indemnification: The SPA contains an exhaustive list of all agreements which will be transferred by way of novation by Magic Life or TUI AG to one or more of the ML Companies and of all guarantees with respect to which a replacement guarantee will need to be provided by a TUI Travel Group company to replace a current guarantee of Magic Life or TUI AG. The parties to the SPA agree to use their respective best endeavours to procure the transfer of the relevant agreements as soon as possible after the date on which the SPA is executed (and notwithstanding Closing) and the replacement of the relevant guarantees as soon as possible after Closing. These transfers are to take place on the basis that: (i) the effective date of the transfers shall be 00.00 hours on 1 November 2010; (ii) Magic Life or TUI AG, as the case may be, shall be liable for and indemnify the relevant ML Companies, TUI Travel Overseas or the relevant TUI Travel Group company, as the case may be, from and against all liabilities under the agreement to be transferred arising up to but excluding 00.00 hours on 1 November 2010 and the relevant ML Companies, TUI Travel Overseas or the relevant TUI Travel Group company shall, subject to certain limitations set out in the Supplemental Agreement, assume and indemnify Magic Life and TUI AG, as the case may be, from and against all liabilities under the agreement to be transferred arising on or after 00.00 hours on 1 November 2010. Magic Life and TUI AG agree jointly and severally to indemnify TUI Travel Overseas fully at all times from and against all costs, proceedings, claims, demands, expenses and liabilities which may be incurred by TUI Travel Overseas as a result of any act or omission by or on behalf of Magic Life in the performance of any agreement to be transferred that is not transferable and TUI Travel Overseas agrees to indemnify Magic Life fully at all times from and against all costs, proceedings, claims, demands, expenses and liabilities incurred by Magic Life acting upon an instruction of TUI Travel Overseas in the performance of any agreement to be transferred that was not transferred. It is expressly stated that the requirements and restrictions of the SPA's provisions limiting liability by time or by amount shall not apply to the indemnities outlined in the preceding sentence. Guarantees: TUI AG and the Company guarantee the complete and timely performance of all of the obligations and liabilities of Magic Life and TUI Travel Overseas respectively. Governing law and dispute resolution: The SPA is to be governed by and construed in accordance with Austrian law. Any dispute is to be resolved and settled under the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Austrian Federal Economic Chamber. Supplemental Agreement The principal terms of the Supplemental Agreement are as follows: Winter losses: If there are any Excess Winter Losses, TUI AG will pay TUI Travel Overseas an amount equal to the Excess Winter Losses. This amount will be adjusted in the event that there were any Egyptian and Tunisian Winter Disruption Losses such that TUI AG will pay TUI Travel Overseas an amount equal to 100% of any Excess Winter Losses (excluding the amount of any Egyptian and Tunisian Winter Disruption Losses) plus an amount equal to the lesser of (i) 50% of such Egyptian and Tunisian Winter Disruption Losses and (ii) the Excess Winter Losses. Egyptian and Tunisian Summer Disruption Losses: In the event that there are any Egyptian and Tunisian Summer Disruption Losses, TUI AG will pay TUI Travel Overseas an amount equal to 50% of such Egyptian and Tunisian Summer Disruption Losses. Capital expenditure: Capital expenditure incurred by one or more of the ML Companies may be recoverable by TUI Travel Overseas from TUI AG if, and to the extent that, amongst other things: (i) such capital expenditure has been incurred by that ML Company with respect to the "Authorised Works" set out in the Supplemental 8
Agreement; (ii) such capital expenditure is incurred with respect to structural repairs in relation to a structural defect which arose before 00.00 hours on 1 November 2010; (iii) the owner of the relevant ML Property has refused to pay or has not paid such capital expenditure given a commercially reasonable amount of time to do so; and (iv) the amounts incurred (or to be incurred) with respect to such capital expenditure are not in excess of the "Maximum Authorised Expenditure" for the relevant works set out in the Supplemental Agreement. To the extent that in the 3‐year period running from the Closing Date (as defined in the SPA), one or more ML Companies incurs such capital expenditure, TUI AG will pay TUI Travel Overseas the following amounts: (i) with respect to all such capital expenditure incurred by the ML Companies up to an aggregate maximum of €5.5 million (“Tier 1 Capex”), an amount equal to 100% of that Tier 1 Capex; and (ii) with respect to all such capital expenditure incurred by the ML Companies in excess of €5.5 million and up to an aggregate maximum of €11.7 million (“Tier 2 Capex”), an amount equal to 50% of that Tier 2 Capex. TUI AG shall not be liable to pay any amount with respect to any such capital expenditure in excess of €11.7 million in aggregate. In the event that a tenancy agreement for the Magic Life Seven Seas property leased from Is Gayrimenkul Yatirim Ortakligi A.S. is not extended, the Tier 2 Capex aggregate maximum and the aggregate amount of capital expenditure in respect of which TUI AG may have liability shall be reduced to €8.0 million. Limitation of SPA indemnification: The TUI Travel Group obligation, as set out in the SPA, to assume and indemnify Magic Life and TUI AG, as the case may be, from and against all liabilities arising on or after 00.00 hours on 1 November 2010 under certain agreements anticipated by the SPA to be transferred by way of novation, or under certain guarantees anticipated by the SPA to be replaced, is qualified as follows: (i) no TUI Travel Group company shall be liable for liabilities arising in the period between 1 November 2010 and Closing (as defined in the SPA) if the Winter Losses exceed €17.4 million and (ii) in the event that the Winter Losses are less than €17.4 million, the TUI Travel Group's aggregate liability for liabilities arising in such period between 1 November 2010 and Closing shall be limited to €17.4 million less the amount of the Winter Losses. Governing law and dispute resolution: The Supplemental Agreement is to be governed by and construed in accordance with Austrian law. Any dispute is to be resolved and settled under the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Austrian Federal Economic Chamber. Umbrella Agreement The principal terms of the Umbrella Agreement are as follows: Transaction and transaction steps: The Umbrella Agreement sets out the steps and parts that are to comprise the Proposed Transaction and the parties to the Umbrella Agreement undertake to enter into the Proposed Transaction Documents and, conditional upon the occurrence of Closing pursuant to the SPA, to use their respective commercially reasonable endeavours to procure the smooth, effective and swift implementation of the Proposed Transaction. Exclusion of liability; indemnification: The Company, TUI Travel Overseas and TUI Austria expressly do not accept and/or assume any liability of Magic Life which may be asserted against any one or more of them as a consequence of section 38 of the Austrian Enterprise Act (Unternehmensgesetzbuch (UGB)) (under an Unternehmensübergang) and/or section 1409 of the Austrian General Civil Code (Allgemeines Bürgerliches Gesetzbuc (ABGB)) in connection with the implementation of the Proposed Transaction. The parties to the Umbrella Agreement undertake to carry out certain actions in order to give effect to their agreement to exclude the Company's, TUI Travel Overseas' and TUI Austria's liability pursuant to section 38 of the Austrian Enterprise Act. Moreover, Magic Life and TUI AG agree jointly and severally to indemnify and hold the Company, TUI Travel Overseas and TUI Austria harmless from and against any damages, liabilities, losses, defects, deficiencies, penalties and expenses any one or more of them may suffer or incur in respect of all of the above and also arising out of or in connection with third party claims asserted against any one or more of them out of or in connection with: (i) certain provisions of Austrian law (including section 38 of the Austrian Enterprise Act and section 1409 of the Austrian General Civil Code); (ii) the termination of the employment of certain employees; and/or (iii) the transfer of the certain employees, including without limitation under the Austrian Employment Law Harmonisation Act. Guarantees: TUI AG guarantees the complete and timely performance of all of the obligations and liabilities of Magic Life and the Company guarantees the same in respect of TUI Travel Overseas and TUI Austria. Governing law and dispute resolution: The Umbrella Agreement is to be governed by and construed in 9
accordance with Austrian law. Any dispute is to be resolved and settled under the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Austrian Federal Economic Chamber. Trademark Assignment Agreement The principal terms of the Trademark Assignment Agreement are as follows: Assignment: Magic Life, as the proprietor of certain trademark registrations and applications, assigns to TUI Austria for consideration of €1 all of its rights, title and interest in and to certain trademarks and the names, words and devices incorporated in the trademarks, including all rights and obligations laid down in certain co‐
existence and prior rights agreements as well as certain licence agreements, and all good will in the trademarks together with all rights and powers arising or accrued from them. Representations and warranties: Magic Life and TUI AG give certain customary representations, warranties and guarantees as to, amongst other things, (i) ownership of the trademarks, (ii) their status and any challenges to them, (iii) the fact that the trademarks which are the subject of the Trademark Assignment Agreement constitute all trademark registrations and applications used by Magic Life and the ML Companies in the ordinary course of their business and (iv) the fact that, in the event that any further rights, title and interest in and to the trademarks are revealed in the future to be owned by Magic Life, TUI AG or any of their affiliates, Magic Life and TUI AG will use their best efforts subsequently to transfer these rights to TUI Austria. Assignment: The Trademark Assignment Agreement may not be assigned by either party to it without the prior written consent of the other party. Governing law and dispute resolution: The Trademark Assignment Agreement is to be governed by and construed in accordance with Austrian law. The competent court in commercial matters for the First District of the City of Vienna is to have non‐exclusive jurisdiction for any dispute resolution. Credit Facility Agreement The principal terms of the Credit Facility Agreement are as follows: Amount: TUI AG grants to the Company a credit facility drawable down by way of multiple advances. The maximum aggregate amount of such advances is €50 million from the date of the Credit Facility Agreement to 31 August 2011, €30 million from 1 September 2011 to 30 April 2012 and €10 million from 1 May 2012 to 31 August 2012. Term: Advances may only be drawn until the fifth business day after the closing of the SPA and TUI AG's obligation to make advances is conditional on there being no Default (as defined in the Credit Facility Agreement) on the date of drawing down or that would result from the drawing down. All outstanding advances shall be repaid on 31 August 2012 (or, if earlier, one month after any offer to acquire the Company's entire issued share capital, other than by TUI AG, is recommended by the Company's board or otherwise becomes unconditional as to acceptances if not so recommended). Purpose of the advances: The facility is stated to be granted to provide funds to enable the Company to finance the Winter Losses. Interest: Interest accrues at EURIBOR plus 275 basis points unless the Company fails to pay any sum on its due date (in which case interest (compounded on a basis determined by TUI AG from time to time) will accrue at EURIBOR plus 675 basis points on that overdue sum). Interest periods are 1, 2 or 3 months at the selection of the Company and accrued interest is payable on the last business day of each such interest period. Prepayments: Voluntary prepayments in a minimum amount of €1 million may be made with at least 10 days' prior written notice. Mandatory prepayment (together with accrued interest) is required should it become unlawful for TUI AG to perform its obligations or to fund or maintain the advances, although TUI AG is obliged, in consultation with the Company and at the Company's expense, to take all reasonable steps to mitigate such circumstances (for example, by transferring its rights and obligations to an affiliate). Gross up: The Credit Facility Agreement contains customary provisions providing for grossing up by the 10
Company in the event that the Company is required to make a deduction or withholding. Representation and warranties: The Company agrees to provide certain customary warranties on the date of the Credit Facility Agreement and on each date that any amount is outstanding under it. TUI AG also agrees to provide certain customary warranties on the date of the Credit Facility Agreement. Default: Failure to pay any sum when due (unless outside of the control of the Company and remedied within 3 business days), breach of any other provisions of the Credit Facility Agreement (and not remedied or waived within 14 days), any representation or warranty becoming incorrect (and not remedied or waived within 14 days), illegality for the Company to make or maintain its obligations and customary insolvency‐related events all constitute events of default that would permit TUI AG to declare all or part of any amount outstanding under the Working Capital Facility immediately due and payable and/or payable on demand. Indemnity: The Company must pay on demand: (i) any stamp duties in connection with the Working Capital Facility; (ii) should there be any, TUI AG's break costs, meaning the amount (if any) by which TUI AG would receive less interest than it would were interest accruing at EURIBOR by depositing any amount paid on a day other than the last business day of an interest period with a leading bank in the European interbank market until that end of the relevant interest period; (iii) such amount as is necessary to indemnify TUI AG against any loss or liability arising out of the Company's non‐compliance or default or out of TUI AG taking any action pursuant to any instructions given or purported to be given over the telephone by any officer of the Company; (iv) TUI AG's costs of enforcement; and (v) losses flowing from any judgment or claim being payable in a currency other than euro. Set‐off: TUI AG has a right to set off any obligation due and payable by the Company under the Credit Facility Agreement against any moneys held by TUI AG for the Company's account. Any appropriation by TUI AG of moneys received from the Company against amounts owing under the Credit Facility Agreement is stated to override any contrary appropriation made by the Company. Governing law and dispute resolution: The Credit Facility Agreement is to be governed by English law. The English courts will have exclusive jurisdiction to settle any dispute. Excess VAT Loan Agreements The principal terms of the Excess VAT Loan Agreements are as follows: Amount: By separate Excess VAT Loan Agreements, TUI AG grants to ML Tunisia I a term loan equal to 7,058,088 Tunisian Dinars and to ML Turkey a term loan equal to 13,786,039 Turkish Lira. Term: Each loan is granted for the period running from the date of the relevant Excess VAT Loan Agreement up to and including 31 December 2019. Interest: No interest shall accrue on either loan unless ML Tunisia I or ML Turkey fails to pay any amount payable by it under the relevant Excess VAT Loan Agreement on its due date (from which point interest shall accrue at three‐months EURIBOR plus 5% on the overdue amount up to the date of actual payment). Repayment: Each borrower's liability to repay its loan, any part thereof and any interest thereon shall be reduced if and to the extent it can demonstrate to TUI AG that any Excess VAT (meaning the excess amount of input VAT paid by the relevant borrower over the amount of output VAT recovered by the relevant borrower, if any, for any period prior to 31 October 2010) is irrecoverable and shall be conditional on the recovery by the relevant borrower of all or part of the Excess VAT, until such time as its loan or any other amounts payable in respect of its loan have been repaid in full and the amount of the repayment shall be the amount of Excess VAT recovered. To the extent that on expiry of the term any loaned amounts have not become repayable in this way, each borrower’s liability to repay such amounts shall lapse and be irrevocably waived by TUI AG. Re‐borrowing: Neither ML Tunisia I nor ML Turkey shall be entitled to re‐borrow any amount prepaid or repaid. Governing law and dispute resolution: The Excess VAT Loan Agreements are to be governed by and construed in accordance with Austrian law. Any dispute is to be resolved and settled under the Rules of Arbitration and Conciliation of the International Arbitral Centre of the Austrian Federal Economic Chamber. 11
PART III ADDITIONAL INFORMATION 1. TUI Travel PLC The Company is a public limited company, operating under the laws of England and Wales (the principal legislation being the Companies Act 2006), incorporated and registered in England and Wales with registered number 6072876 and domiciled in the United Kingdom. The registered office of the Company is at TUI Travel House, Crawley Business Quarter, Fleming Way, Crawley, West Sussex RH10 9QL, United Kingdom and its telephone number is +44 (0) 1293 645 700. TUI Travel Group is the world’s leading international leisure travel group operating in over 180 countries with more than 30 million customers in 27 key source markets. TUI Travel Group has over 200 brands which are comprised of market‐leading mainstream brands and specialist travel businesses. Operating in four sectors (Mainstream, Accommodation & Destinations, Specialist & Activity and Emerging Markets), TUI Travel Group is focused on providing customers with a wide choice of differentiated and flexible travel experiences. TUI Travel Group is headquartered in the UK and employs approximately 49,000 people. In the financial year ended 30 September 2010, TUI Travel Group had revenues of £13.5bn and an underlying operating profit before tax of £447m. The Company is the only leisure travel company listed on the London Stock Exchange in the FTSE 100 and has the ticker code TT. 2. Major shareholders As at 3 June 2011 (being the latest practicable date prior to the publication of this document), so far as the Company is aware, the following persons, directly or indirectly, hold voting rights of 3% or more of the issued share capital of the Company (which does not include any Treasury Shares as the Company does not currently hold any of its shares in treasury): Name Number of ordinary shares Percentage of issued share capital (exclusive of Treasury Shares) TUI AG 620,137,750 55.47% Monteray Enterprises Ltd 45,152,480 4.04% 3. Significant change There has been no significant change in the financial or trading position of TUI Travel Group since 31 March 2011, the date to which TUI Travel Group's last published interim results were prepared. 4. Material contracts Save as set out below: (i) no material contract (other than a contract entered into in the ordinary course of business) to which any member of TUI Travel Group is a party has been entered into within the two years immediately preceding the date of this document; and (ii) no other contract (other than a contract entered into in the ordinary course of business) has been entered into at any time by any member of TUI Travel Group which contains a provision under which any member of TUI Travel Group has any obligation or entitlement which is material to TUI Travel Group as at the date of this document, in each case which shareholders of the Company would reasonably require information about in order to make a properly informed assessment of how to vote on the Resolution: Relationship Agreement with TUI AG The Relationship Agreement between TUI AG and the Company, dated 29 June 2007, includes the principle that the Company will operate independently of TUI AG and records the understanding between TUI AG and the Company regarding the relationship between them and the governance of the Company. The Relationship Agreement will remain in force until either the shares in the Company are no longer admitted to trading on the London Stock Exchange or TUI AG has less than 10% of the rights to vote at the Company's general meetings. In addition, in the event that another party acquires control of TUI AG during the term of the Relationship Agreement, TUI AG will lose certain rights under the Relationship Agreement including its rights in respect of the 12
composition of the Board. The Relationship Agreement contains restrictions on the acquisition by TUI AG of additional shares in the Company which result in the increase of its shareholding to more than 55% of the voting rights on a fully‐diluted basis (save where TUI AG makes a general offer to acquire all of the Company's shares in issue). A number of bonds are held on TUI AG’s behalf and, if converted at the conversion price set on the launch date, would give rise to 52,309,463 new shares. On a fully‐diluted basis (if shares held by all bondholders were converted), TUI AG had a holding of 50.83% as at 31 May 2011. As a percentage of shares in issue, and so on an undiluted basis, TUI AG’s holding as at 31 May 2011 was 55.47%. The Relationship Agreement provides that the Board shall have a maximum of 17 Directors, a majority of whom shall be independent. It confers on TUI AG the right to appoint two Non‐Executive Directors to the Board for so long as TUI AG holds 30% or more of the voting rights in the Company. In addition, for so long as TUI AG holds 40% or more of the voting rights in the Company, TUI AG may appoint one of its Non‐Executive Director appointees as the Chairman of the Board. The Relationship Agreement also allows TUI AG to relinquish its right to appoint the Chairman and instead to appoint the Chief Executive of the Company. TUI AG has anti‐dilution rights in respect of further issues of shares in the Company other than on a pre‐emptive basis. The Company has also agreed that certain matters will require the prior approval of 80% of the Directors present at the meeting of the Board at which such matter is considered, including material changes to the business of any TUI Travel Group company, acquisitions and disposals of a value which exceeds £10m, the entry into, variation or redemption prior to their due date of any borrowing facilities and the approval of the annual budget. In addition, the Company is prevented from doing certain things which may cause TUI AG to breach any of the restrictions under its current bond facilities in the absence of any permitted exemption, including entering into external borrowings, creating security over its assets and restricting its ability to pay dividends. 5. Consents Deutsche Bank has given, and has not withdrawn, its written consent to the inclusion in this document of the references to its name in the form and context in which they are included. 6. Documents available for inspection Copies of the following documents will be available for inspection during normal business hours on any weekday (Saturdays and public holidays excepted) at the registered office of the Company and at the offices of Herbert Smith LLP, Exchange House, Primrose Street, London EC2A 2HS from the date of this document up to and including the date of the General Meeting and for the duration of the General Meeting: (a) the SPA, the Supplemental Agreement, the Umbrella Agreement, the Trademark Assignment Agreement and the Loan Agreements; (b) the memorandum and articles of association of the Company; and (c) the audited consolidated accounts of the Company for the periods ended 30 September 2009 and 30 September 2010. 13
DEFINITIONS The following definitions apply throughout this document, unless the context requires otherwise: "Board" the board of directors of the Company "Company" TUI Travel PLC "Credit Facility Agreement" the agreement pursuant to which the Working Capital Facility is to be made available by TUI AG to the Company to be entered into on Closing (as defined in the SPA) "Deputy Chairman" the deputy chairman of the Board "Deutsche Bank" Deutsche Bank AG, London Branch "Directors" the directors of the Company "Egyptian and Tunisian Summer Disruption Losses" as set out in their respective monthly management accounts (adjusted for certain agreed items that do not reflect shortfalls attributable to the political situation in Egypt and Tunisia in accordance with the Supplemental Agreement), for the period running from 1 May 2011 to 30 October 2011 inclusive, the amount (if any) by which the actual combined profits (or losses, as the case may be) of ML Egypt, ML Tunisia I and ML Tunisia II were less than a combined profit of €6.1 million "Egyptian and Tunisian Winter Disruption Losses" as set out in their respective monthly management accounts (adjusted for certain agreed items that do not reflect shortfalls attributable to the political situation in Egypt and Tunisia in accordance with the Supplemental Agreement), for the period running from 1 November 2010 to 30 April 2011 inclusive, the amount (if any) by which the actual combined losses of ML Egypt, ML Tunisia I and ML Tunisia II exceeded €5.9 million "Excess VAT Loan Agreements" the loan agreements between (i) TUI AG and ML Tunisia I and (ii) TUI AG and ML Turkey, each to be entered into on the Closing Date (as defined in the SPA) "Excess Winter Losses" the amount by which the Winter Losses exceeded €17.4 million "General Meeting" the General Meeting to be held on 22 June 2011 at 10.30am, or any adjournment thereof "IFRS" International Financial Reporting Standards as adopted by the EU "Listing Rules" the listing rules made by the Financial Services Authority under Part VI of the Financial Services and Market Act 2000 "Loan Agreements" The Credit Facility Agreement and the Excess VAT Loan Agreements "Magic Life" Magic Life GmbH & Co KG with corporate seat in Vienna and business address at Landstraßer Hauptstraße 146, 1030 Vienna, registered in the companies register of the Vienna Commercial Court under registration number FN 283987d 14
"Minority Shareholders" (i) Mag Clemens Schneider in his capacity as holder of 200 parts in ML Egypt; (ii) Mag Johannes Schaden in his capacity as holder of 1 unit in ML Greece; (iii) Dr. Andreas Karsten, Dieter Zümpel, Mag Johannes Schaden, Birgit Husmann, Mossab Battikh and Khemaies Chebaane in their respective capacities as holders of 1 share each in each of ML Tunisia I and ML Tunisa II; and (iv) Dr. Andreas Karsten, Mehmet Coşkun Őzavnik, Mag Johannes Schaden and Refik N Türkoğlu in their respective capacities as holders of 1,050 shares each in ML Turkey "ML Companies" ML Egypt, ML Greece, ML Spain, ML Tunisia I, ML Tunisia II and ML Turkey "ML Egypt" Magic Life for Hotels LLC with corporate seat in South Nabq, Sharm el Sheikh, Egypt, and business address at Kamanaih Hotel Nabk, Sharm el Sheikh, South Sinai, registered in the Commercial Register of the Ministry of Trade & Industry under enrolment number 8593 "ML Greece" ML GREECE L.T.D. with corporate seat in the Municipality of Alimos, Greece, and business address at 11, Kalamakiou av., 17455, Alimos, registered in the companies' register of the Athens Court of First Instance with general number 3037/2001 and particular number 847 "ML Properties" the properties managed or leased by the ML Companies pursuant to the documents set out in Appendix 1 to the Supplemental Agreement "ML Spain" Magic Life Hotels, S.L. with corporate seat at Urb. Essquinzo Butihondo without number, Morro Jable, (35625), Pajara, Las Palmas, Spain, registered in the Commercial Registry of Fuerteventura (Spain) and holding tax identification number B76063510 "ML Tunisia I" Magic Life Tunisie S.A. with corporate seat at El Merezka, 8050 Hammamet, Tunisia, and business address at 71, Avenue Alain Savary, 1003 Tunis, registered under tax registration (matricule fiscal) number 578800G/A/M/000 "ML Tunisia II" Magic Tourism International S.A. with corporate seat in Ariana, Tunisia, and business address at Complexe Le Forum, No. B42, 4ème Etage, 1, Rue de Carthage, 2080‐Ariana, registered in the Registre de Commerce under registration number RCP B 2434552006 "ML Turkey" Magic Life Der Club International Turizm Hizmetleri A.Ş. with corporate seat in Istanbul, Turkey, and business address at Kısıklı Caddesi N0.7 Birinci Kat Altuni‐zade Üsküdar İstanbul, registered in the companies' register under registration number 453915 "Proposed Transaction" the acquisition, pursuant to the Proposed Transaction Documents, of (i) the entire issued share capital of each of ML Spain, ML Tunisia I, ML Tunisia II and ML Turkey, (ii) the parts in ML Egypt corresponding to a 100% participation in ML Egypt and (iii) the units in ML Greece corresponding to a 100% participation in ML Greece, the related assignment of intellectual property 15 rights, the related loans from TUI AG to members of TUI Travel Group and the other related actions contemplated by the Proposed Transaction Documents "Proposed Transaction Documents" the SPA, the Supplemental Agreement, the Umbrella Agreement, the Trademark Assignment Agreement and the Loan Agreements "Resolution" the ordinary resolution to approve the Proposed Transaction to be proposed at the General Meeting, the full text of which is set out in the Notice of General Meeting at the end of this document "SPA" the share purchase and transfer agreement concluded by and between Magic Life, TUI AG, TUI Travel Overseas and the Company on 26 May 2011 "Subsidiary" any entity that is from time to time (i) a subsidiary undertaking of the Company, or (ii) consolidated in the consolidated accounts of the Company under applicable law and IFRS or (iii) both (i) and (ii) above; and "Subsidiaries" shall be construed accordingly "Supplemental Agreement" the supplemental agreement between Magic Life, TUI AG, TUI Travel Overseas and the Company entered into on 26 May 2011 pursuant to which TUI AG agrees to make certain compensation payments to TUI Travel Overseas "Trademark Assignment Agreement" the trademark assignment agreement concluded by and between Magic Life and TUI Austria, with accession of TUI AG and the Company, on 26 May 2011, to take effect on Closing "Treasury Shares" shares held as treasury shares as defined in section as defined in section 724(5) of the Companies Act 2006 (as amended) "TUI AG" TUI AG, a company incorporated in Germany whose registered office is at Karl‐Wiechert‐ Allee 4, 30625 Hannover, Germany "TUI Austria" TUI Austria Holding GmbH, a wholly‐owned subsidiary of the Company "TUI Travel Group" the Company and its Subsidiaries "TUI Travel Overseas" TUI Travel Overseas Holdings Limited with its registered office at TUI Travel House, Crawley Business Quarter, Fleming Way, West Sussex RH10 9QL, England, incorporated and registered in England and Wales under number 4998708 "Umbrella Agreement" the umbrella agreement concluded by and between Magic Life, TUI AG, TUI Travel Overseas, the Company and TUI Austria on 26 May 2011 "Winter Losses" the losses of the ML Companies, as set out in the consolidated monthly management accounts for the ML Companies (adjusted for certain agreed items that do not reflect shortfalls attributable to the political situation in Egypt and Tunisia in accordance with the Supplemental Agreement), for the period running from 1 November 2010 to 30 April 2011 inclusive "Working Capital Facility" the facility made available by TUI AG to TUI Travel 16 NOTICE OF GENERAL MEETING TUI TRAVEL PLC (THE "COMPANY") (incorporated and registered in England and Wales under number 6072876) NOTICE IS HEREBY GIVEN that a General Meeting of the Company will be held on 22 June 2 0 1 1 a t 1 0 . 3 0 a m at the offices of Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS to consider and, if thought fit, pass the following resolution, which will be proposed as an ordinary resolution: Ordinary Resolution THAT, the proposed transaction by the Company and its wholly‐owned subsidiaries (including, without limitation, TUI Travel Overseas Holdings Limited) with Magic Life GmbH & Co KG and TUI AG pursuant to the SPA, the Supplemental Agreement, the Umbrella Agreement, the Trademark Assignment Agreement and the Loan Agreements (as defined in the circular to shareholders dated 6 June 2011, a copy of which has been produced to the meeting and initialled by the Chairman of the meeting for the purposes of identification only), in the manner and on the terms and conditions of the SPA, the Supplemental Agreement, the Umbrella Agreement, the Trademark Assignment Agreement and the Loan Agreements, be and is hereby approved and that the Directors be and are hereby authorised to take all such steps as may be necessary or desirable in relation thereto and to carry the same into effect with such modifications, variations, revisions or amendments (providing such modifications, variations, revisions or amendments are not of a material nature) as they shall deem necessary or desirable. BY ORDER OF THE BOARD Andrew John Company Secretary 6 June 2011 Registered Office: TUI Travel House, Crawley Business Quarter, Fleming Way, Crawley, West Sussex RH10 9QL 17 Notes: 1 A m e m b e r e n t i t l e d t o a t t e n d a n d v o t e a t t h e G e n e r a l M e e t i n g m a y a p p o i n t a n o t h e r p e r s o n ( s ) ( w h o n e e d n o t b e a member of the Company) to exercise all or any of his rights to attend, speak and vote at the meeting. A member can appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the rights attaching to different shares held by him. 2 A proxy does not need to be a member of the Company but must attend the General Meeting in person to represent you. Your proxy could be the Chairman, another director of the Company or another person who has agreed to attend to represent you. Your proxy will vote as you instruct and must attend the meeting for your vote to be counted. Details of how to appoint the Chairman or another person as your proxy using the proxy form are set out in the notes to the proxy form. Appointing a proxy does not preclude you from attending the meeting and voting in person in place of your proxy but in the event that, and to the extent that, you personally vote your shares, your proxy shall not be entitled to vote and any vote cast by your proxy in such circumstances shall be ignored. 3 A proxy form, which may be used to make this appointment and give proxy instructions, accompanies this notice. Details of how to appoint a proxy are set out in the notes to the proxy form. If you do not have a proxy form and believe that you should have one, or if you require additional forms, please contact Equiniti Limited direct on 0871 384 2212. Calls to this number are charged at 8p per minute from a BT landline. Other telephone provider costs may vary. The Equiniti overseas helpline number is +44 121 415 7047 – lines are open from 8.30am to 5.30pm Monday to Friday. As an alternative to completing a hard copy proxy form, proxies may be appointed electronically in accordance with note 5 below. 4 A copy of this notice has been sent for information only to persons who have been nominated by a member to enjoy information rights under Section 146 of the Companies Act 2006 (a “Nominated Person”). The rights to appoint a proxy cannot be exercised by a Nominated Person: they can only be exercised by the member. However, a Nominated Person may have a right, under an agreement between him and the member by whom he was nominated, to be appointed as a proxy for the meeting or to have someone else so appointed. If a Nominated Person does not have such a right or does not wish to exercise it, he may have a right under such an agreement to give instructions to the member as to the exercise of voting rights. If you are a Nominated Person, you have been nominated to receive general shareholder communications directly from the Company but it is important to remember that your main contact in terms of your investment remains as it was (so the registered shareholder, or perhaps custodian or broker, who administers the investment on your behalf). Therefore, any changes or queries relating to your personal details and holding (including any administration thereof) must continue to be directed to your existing contact at your investment manager or custodian. The Company cannot guarantee dealing with matters that are directed to it in error. The only exception to this is where the Company, in exercising one of its powers under the Companies Act 2006, writes to you directly for a response. 5
In order to be valid, an appointment of proxy must be returned (together with any authority under which it is executed or a copy of the authority certified notarially or in some other way approved by the directors) by one of the following methods: 
in hard copy form by post, by courier or by hand to the Company’s Registrars, Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex BN99 6LA; or 
if you elected for electronic communication, by completing it online via your Shareview.co.uk portfolio; or 
if you have not registered a preference for electronic communication, by completing it online at www.sharevote.co.uk following the on‐screen submission 18 instructions – you will need to identify yourself with your voting ID, task ID and shareholder reference number, as printed on your proxy form; or 
6 7 8 9 in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below, and in each case must be received by the Company not less than 48 hours before the time of the meeting. To change your proxy instructions you may return a new proxy appointment using the methods set out above. Where you have appointed a proxy using the hard copy proxy form and would like to change the instructions using another hard copy proxy form, please contact Equiniti Limited on 0871 384 2212. Calls to this number are charged at 8p per minute from a BT landline. Other telephone provider costs may vary. The Equiniti overseas helpline number is +44 121 415 7047 – lines are open from 8.30am to 5.30pm Monday to Friday. The deadline for receipt of proxy appointments (see above) also applies in relation to amended instructions. Any attempt to terminate or amend a proxy appointment received after this deadline will be disregarded. Where two or more valid separate appointments of proxy are received in respect of the same share in respect of the same meeting, the one which is last sent shall be treated as replacing and revoking the other or others. Only persons entered on the register of members of the Company at 6.00pm on 20 June 2011 (or, if the meeting is adjourned, at 6.00pm on the date which is two days prior to the adjourned meeting) shall be entitled to attend and vote at the meeting or adjourned meeting. Changes to entries on the register after this time shall be disregarded in determining the rights of persons to attend or vote (and the number of votes they may cast) at the meeting or adjourned meeting, notwithstanding any provisions in any enactment, articles of association or other instrument to the contrary. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures described in the CREST Manual on the Euroclear website (www.euroclear.com/CREST). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy, must (in order to be valid) be transmitted so as to be received by the issuer’s agent (ID RA19) by the latest time(s) for receipt of proxy appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting 19 service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. 10 Please note that the Company takes all reasonable precautions to ensure no viruses are present in any electronic communication it sends out but the Company cannot accept responsibility for loss or damage arising from the opening or use of any email or attachments from the Company and recommends that shareholders subject all messages to virus checking procedures prior to use. Any electronic communication received by the Company, including (without limitation) the lodgement of an electronic proxy form, that is found to contain any virus will not be accepted. 11 A member of the Company which is a corporation may authorise a person or p e r s o n s t o a c t a s i t s representative(s) at the General Meeting. In accordance with the provisions of the Companies Act 2006, each such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual member of the Company, provided that they do not do so in relation to the same shares. It is no longer necessary to nominate a designated corporate representative. 12 The Company must cause to be answered at the General Meeting any question relating to the business being dealt with at the meeting which is put by a member attending the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, or (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company, or the good order of the meeting, that the question be answered. 13 As at 3 June 2011 (being the latest business day prior to the publication of this notice), the Company’s issued share capital consists of 1,118,010,670 ordinary shares, carrying one vote each. The Company does not hold any ordinary shares in the capital of the Company in treasury. Therefore, the total voting rights in the Company are 1,118,010,670. 14 The contents of this notice of meeting, details of the total number of shares in respect of which members are entitled to exercise voting rights at the meeting, details of the totals of the voting rights that members are entitled to exercise at the meeting and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the Company after the date of this notice will be available on the Company’s website www.tuitravelplc.com. 15 You may not use any electronic address provided in this notice of meeting to communicate with the Company for any purposes other than those expressly stated.
20 Perivan Financial Print 221740